Moneyfacts noted that uncertainty in the economy ahead, particularly relating to the UK’s relationship with the EU after its departure from the single market, meant some borrowers will be looking to protect themselves against unpredictable rate changes.
Since January 2014, 10-year fixed rates have steadily fallen year-on-year from 4.23% to 3.20% today. Despite this, rates are heading down towards their record low of 3.11% in November, which Moneyfacts said could be an indication of a future trend in rates during 2017.
Charlotte Nelson, finance expert at Moneyfacts.co.uk, said lenders have been trying to “muscle in” on the 10-year fix market in recent years, boosting competition.
“Even with the slight increase in the average rate, borrowers could find that a 10-year fixed mortgage gives them the peace of mind that their repayment will not change, no matter what happens. However, while we know rates cannot stay at these lows forever, we do not know when they will rise, or by how much,” she added.
“Borrowers must also bear in mind that most 10-year mortgages require them to be tied to the deal for the full term, so it is vital that they weigh up whether they will need some flexibility in the decade ahead. Failing to do so could mean borrowers end up paying a hefty early redemption penalty. However, thankfully, Moneyfacts data shows that all 10-year products currently available offer some form of portability for those who may wish to move home, although borrowers should be aware that affordability may need to be reassessed.
“Any borrowers considering this type of deal will need to puzzle through the maze and weigh up the odds to see if the gamble will eventually pay off,” Nelson said.
Last week Moneyfacts revealed that two-year fixed rates reached their lowest in 12 months dropping from 2.59% to 2.31%.
John Charcol’s product technical manager Simon Collins said at the time that more borrowers were shifting their focus toward longer-term fixed rates to ensure their introductory term did not finish during Brexit negotiations, when the market is likely to be more volatile.